HMRC Litigation – Bankruptcy or Winding Up Proceedings

If you or your company cannot pay its debts to HMRC, they have a few options which can severely affect your future. Bankruptcy and a winding up petition can mean the end of your business, and throw future business projects into jeopardy.

What is the difference between bankruptcy and winding up proceedings?

When you owe a large amount to HMRC, they can apply for you to be made bankrupt – if other options are exhausted. HMRC can apply to make you bankrupt but you will need to owe them in excess of £2,000 for this to proceed.

A winding up petition is a legal notice put forward to a court by HMRC. The petition asks the court to have the company liquidated in a way of getting payment on a debt. This follows the belief that the company is insolvent and cannot pay the debt on normal terms.

After one or a series of non-payments, the HMRC will either apply for a winding up petition or bankruptcy on your behalf. It is usually the last resort for HMRC.

What is the process for bankruptcy by HMRC?

When HMRC has unsuccessfully attempted to recover the monies owed, they will pass on your file to HMRC Enforcement and Insolvency Office (EIO) to progress with the bankruptcy action.

The EIO will allow you 14 days to pay off the debt. On some occasions, they may allow you to pay the debt off in instalments.

However, if you are unable to pay the debt, then the bankruptcy action will start.

What is the process of a winding up petition by HMRC?

If you or your company has been struggling to pay what is owed, a winding up petition is an inevitable consequence. There is a small opportunity to reverse things, but you will have to act quickly – usually within the first seven days – or legal proceedings will take over.

Once HMRC applies for the winding up order, otherwise known as the compulsory liquidation process, the Court if the Official Receiver will investigate the company’s affairs and the reasons for its failure.

After seven days, the company assets will be valued and sold. The affairs of the directors will be investigated by the liquidator. If there is any evidence of misconduct, criminal proceedings may take place resulting in bans, fines and in some cases, imprisonment.

How DPP Business & Tax can help

This is usually a stressful time for anyone running a business. If the HMRC are pursuing a debt that you are struggling to settle, legal advice must be sought.

Luckily, the financial lawyers at DPP Business & Tax Solicitors have years of experience dealing with these situations and, if possible, are able to reverse any winding up decisions issued by the HMRC.

Whatever your circumstances, DPP Business & Tax Solicitors will fight hard to achieve the best possible outcome for you. Just contact us here and we’ll be in touch to go through your options.

Tax Services

We’ve been defending tax cases and advising in actions against HMRC for more than twenty years.